Belfast Telegraph

£5bn: cost to Northern Ireland taxpayers for Private Finance Initiative projects

By Rebecca Black

A public spending watchdog has called for a review of lucrative Government private finance contracts in Northern Ireland which are costing the taxpayer more than £1 million a day.

At a time when departments are facing unprecedented cuts to their budgets, it has emerged that Stormont must pay back £375m a year until 2030 - totalling around £5bn - because of controversial Private Finance Initiative (PFI) arrangements.

PFIs are deals signed with businesses which build capital projects like office blocks and hospitals, and then lease them to the public sector for years.

Significant flaws have been discovered in a flagship PFI project to build and operate Belfast Metropolitan College's Titanic Quarter campus. The project, which was £44m to build, will cost the taxpayer more than £200m over 25 years.

The Public Affairs Committee report expressed "serious concerns" over project management, governance, decision-making and the procurement process for the building of that new Belfast Met campus.

The report found:

  • The public sector injected £20m into the project, including £5m to purchase the sub-lease for the Titanic Quarter site.
  • Consultancy costs on the project were also allowed to run out of control from £300,000 to £1.5m.
  • The sale of the college's surplus properties at Brunswick Street and College Square East was intended to cover £20m of capital contributions. However, proceeds from the sales this year were just £5.6m, leaving a shortfall in excess of £14m.
  • Negotiations with bidder Ivywood Colleges Limited (ICL) extended from the planned 12 months to 33 months, and the value for money of the deal eroded significantly.
  • ICL's "privileged development position" on the Titanic Quarter site meant that it dictated the outcome and pace of negotiations.
  • Belfast Met did not have a robust estate strategy in place and the audit trail supporting the identification of accommodation requirements for the new campus was acknowledged by the department and college as being weak.
  • An Audit Office report earlier this year found that the new campus had been planned to cost £44m, but will spiral to £211m over the length of the contract.

Belfast Met entered into the 25-year agreement with ICL in 2009 to design, build, finance and operate the new campus in the Titanic Quarter.

Today's PAC report also found that there are currently 32 PFI projects running in Northern Ireland.

It said the wider lessons that have emerged from the Belfast Met example are "not new".

PAC chair Michaela Boyle said: "The Department for Employment and Learning (DEL) paid £20m of the £44m capital cost up front.

"The Belfast Met was the largest and most expensive further education public/private funding project ever undertaken.

"There are a number of issues that we believe need to be addressed. It is vitally important now that a comprehensive value for money assessment be carried out which factors in all costs of the project."

Ms Boyle said there were "serious questions to be asked on our long-term PFI commitments".

"As part of its consideration of wider issues, the committee is calling for greater transparency of long-term PFI commitments," she said.

A spokeswoman for the Department for Employment and Learning said: "The department welcomes the publication of the report and will consider the Committee's recommendations fully."

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